Due to a failure to participate in any meaningful savings program or due to bad investments or unforeseen financial burdens, etc., the vast majority of people in this country have been unable to achieve financial security for either themselves or their families. Accordingly, the vast majority of retired people in this country are unfortunately in a position where they have to exist on a retirement income that is not very far from the poverty level. Many of these individuals may have received a more than respectable annual salary for most of their working lives. The present data processing method and apparatus uniquely contributes to the accumulation of funds towards a predetermined objective or goal with built in assurances for accomplishing the objective.
In order to be successful in efficiently achieving a desired end, it is critical to have well defined goals. For best results, careful monitoring of the progress towards achieving the goals is highly desirable. While there are many sophisticated prior art financial management data processing systems, such systems are typically utilized to monitor the investments selected by a client and/or an advising broker without regard to any predefined goal. For example, the security brokerage/cash management system described in U.S. Pat. No. 4,326,442, discloses a data processing system for monitoring and controlling a wide range of investments without regard to an initial investment base achieving any predefined goal.
The data processing system of the present invention manages, monitors and reports the growth of a participant's investment base with respect to progress towards achieving a predetermined investment target or goal amount. Additionally, the data processing method and apparatus of an exemplary embodiment of the present invention, monitors and controls a wide variety of financial services which are provided to the participant such as check writing and borrowing privileges as well as insurance benefits.
The growth of a participant's initial investment base as may be supplemented by monthly investments is tracked and interpreted based on criteria and projections periodically made which reflect how well the account is progressing towards achieving the target amount. In this regard, the time frame that it will take for the account to reach the target amount at the current account growth rate is projected at periodic intervals, e.g., monthly. The impact on such a time frame of accentuated payments, e.g., increased monthly payments or modified cycle payments (i.e., payments made at intervals of greater than once a month), is also reported to participants. As will be exemplified below, the present system segregates the growing investment base into a plurality of separate funds which are each monitored. The process of using maturing investments over time incorporating these features as described in this application is referred to as investment indexing.
In an exemplary embodiment of the present invention, the data processing system is programmed to -track a predetermined guaranteed minimum rate return on a participants' investment base. While this predetermined minimum guaranteed rate of return may be any reasonable rate of return (e.g., 4%, 6%, 8% or more), in the detailed description which follows the guaranteed rate of return for purposes of example only is 8%.
In an exemplary embodiment, this minimum rate of return is guaranteed by the company managing all the participant investments. The managing company receives from an individual participant a predetermined initial investment base, and typically a commitment by the investor to make a predetermined monthly investment. At the outset, the client also selects a fixed target amount that the system utilizes as its target goal (e.g., $100,000, $500,000, $1,000,000 dollars). Alternatively, the target amount may be based on a fixed percentage of the initial investment (e.g., 50%). The data processing system of the present invention tracks the growth of the initial investment base as well as the accumulated monthly payment base and periodically determines the time frame required to reach a participant's selected target goal based on current performance per projected or programmed guidelines. The funds may, for example, be invested in a tax deferred vehicle such as insurance or tax exempt securities.
As noted above, the company controlling participant investments guarantees a predetermined rate of return on investments, e.g., 8% compounded monthly. If the prevailing rate of return is not sufficient to sustain growth of the accounts at the predetermined rate, the system tracks the amount of funds required to be supplied by the managing company to place the investment base growth rate back on the guaranteed minimum return rate.
If the achieved investment rate of return from the managing company's controlled investment yields a higher rate of return than the minimum guaranteed rate, the excess amount over and above the minimum return may, for example, be split or otherwise allocated between the managing company and the participating client after predetermined operating costs are deducted or may be distributed in any other desirable manner. The present system monitors the growth of the investment by segregating the growing investment base into a plurality of separate funds. As opposed to maintaining separate funds based on growth in excess of a predetermined minimum rate of return 8%, the present invention alternatively contemplates segregating a predetermined percentage of the original investment (such as 15% of the total investment) to achieve a predetermined return, for example, 50% of the total funds committed. For further details in this regard, see U.S. Pat. Nos. 4,994,964 and 4,885,685 are hereby expressly incorporated by reference herein. For example, U.S. Pat. No. 4,885,685 describes how a first fund comprising, for example, 85% of an initial investment base is utilized to support a predetermined investor activity, and 15% of the investment base is utilized to achieve a predetermined target investment goal. Similarly, in the present application, a first account fund (e.g., 85% of an initial investment base) may be used for user controlled investments/expenditures and a second account fund (e.g., 15% of the initial investment base) may be used to achieve a guaranteed target amount, such as 50% of the total funds committed. The second account may be treated as a special account with check writing privileges which is monitored and controlled to achieve the guaranteed return, for example, in the manner described in U.S. Pat. No. 4,885,685 or in the manner described in detail herein. The managing company may typically reserve a significant portion of its profits due to participant investment performance to cover future deficits.
The participant may be offered check writing and borrowing privileges based on a separate account which may be funded based on a predetermined percentage of the initial investment (and which returns funds to the initial investment account) or on a predetermined percentage of accumulated funds which are in excess above the minimum guaranteed rate of return. It is noted that a predetermined percentage of the participants excess funds above the minimum rate of return are reserved for covering deficits below the minimum rate of return (i.e., if the deficit is so significant that the companies portion of split excess funds over the 8% minimum rate of return is exhausted).
By way of example only, in order to prevent a participant from self-destructive investments which would preclude achievement of the target goal in the desired time frame, the participant is only permitted to choose his or her own investments using a predetermined percentage of the funds which have accumulated as an excess above the 8% or any predetermined target growth level. The return yielded by the participant's self-directed investments may be used to repay the original investment amount deducted from the account.
The system also monitors the amount of funds which the participant is allowed to borrow at any predetermined time. The amount which may be borrowed may, for example, be a predetermined percentage of the funds that have accumulated based upon the 8% minimum guaranteed rate of return. As with any loan, the amount borrowed is expected to be repaid in scheduled monthly installments. Such is, by way of example only, repayment demanded by the system in order to keep the participant's account on track to the target goal.
The participant has essentially complete flexibility as to selecting an initial investment amount, the amount of the monthly payments and the desired target investment goal. As noted above, if desired, the initial investment amount may be based on, for example, 85% of the total investment funding which may be used for user controlled investment expenditures and the remaining 15% of the total funding may be segregated to achieve the predetermined target goal (e.g., 50% of the initial investment funding). The managing company then uses the data processing system of the present invention to project the amount of time that it will take for the account to achieve the target goal based on a predetermined minimum rate of return, (e.g., 8%). As time progresses, the data processing system is used to project the reduced amount of time to achieve the target goal in view of the higher return on investment actually realized (e.g., 12%).
The data processing system of the present invention is utilized to periodically process the data relating to the current monthly payments, initial investment base, and prevailing rate of return on investments to project how much more time will be required to reach the participant's target investment amount. At the same time, the data processing method and apparatus of the present invention keeps track of the parameters which govern a participant's check writing, borrowing and insurance benefits which flow from his current investment base. Periodic reports reflecting such investment base growth, target projections and financial services related information are generated, for example, on a monthly basis, for both the participant's use and the managing company's use.